Use of Shooting Star Candlestick Method In Crypto Trading and Is It Effective? [2021]

In crypto trading, most traders use the shooting star candle and its pattern. The reason to use it is they want to know the bearish reversals. Generally, it is the formation of a single candle, and traders use this pattern to understand the exact time to exit from the market.

Besides this, some traders use this pattern to know about the concise entries present in the market. It is a fact that too many traders like the shooting star pattern. It is easy to use, and this pattern creates powerful signals when used with the other tools.

Shooting Star Candle: Overview

The shooting star candlestick inspects the bearish reversal pattern, and it looks like the inverted hammer. Some traders know the candlestick pattern as the Pin Bar, and it comes with various price characteristics.

After understanding the shooting star candlestick pattern, you will know why too many traders rely on it. People don’t have enough knowledge about reversal trading and do it the wrong way, and as a result, they face too much loss.

The best thing for you is that the shooting star strategy will easily handle this problem. It helps every trader know how to trade in the market. Read the complete article to learn more about the shooting star candlestick strategy.

What Is A Shooting Star?

If we talk about the concept of the shooting star candlestick, then it is the bearish reversal pattern and very well-known in the trading market. It looks like an inverted hammer, but what’s essential is that this pattern is found in the market uptrend rather than the market downtrend.

The shooting star is made by a single candle that contains the short lower body, and the lower wick is not present, or it is very little. In comparison to this, the upper wick is two times longer than the lower one.

If you see the bullish uptrend and spot the shooting star candle, there is a high possibility of a reversal trend. It is the main reason traders use the shooting star to know about the short entries in the market.

Example

If you want to trade with the help of shooting star candlestick, then you must have to take care of some points:

Entry to Trading

If you want to enter into the shooting star trading, you should confirm that the trend must be actively bullish before doing this.

Use of Stop-loss

The next thing you should remember is that you always have to use the stop-loss at the time, trading with the help of the shooting star candlestick.

Earning Profit

The target price must be the same as the shooting star pattern size for the trade.

Now, take a look at an example of the shooting star candlestick given below.

A chart is present in which the stock is always going up. Because of this, the shooting star candlesticks appear, and it reveals that after opening, the price goes high and then closes. The next day the price closes lower, confirming that the price will go lower for some time.

If the shooting star formed after the high price trend, then it signals the bearish reversal. If the traders can understand this pattern, then they can easily trade for long positions.

What Does the Shooting Star Tell You?

The shooting star tells about the downside reversal. This pattern is most successful when the shooting star pattern is formed after the two or three successive rising candles that contain the new highs.

At the time of trading, the shooting star forms and then rises energetically. It always tells about the buying coercion same as the previous session of trading. But when the session is close to ending, all sellers try to lower the price near the opening.

It indicates that all the buyers don’t have any control over the price, and the sellers have complete control over it at the end of the day. Generally, the high upper shadow shows that all the buyers are in the losing condition because the price goes down at the time of opening.

After the shooting star candle formation, the candle goes down and moves down for a month or more. The primary work of the shooting star candle is to inform about the reversal trend and shows that the price will go down for some time.

The Difference Between the Shooting Star and the Inverted Hammer

A shooting star candle and an inverted hammer are both similar in appearance. Both contain the upper shadows that are high, and the real bodies of both candles are small; their bottom shadows are lower, or they don’t have it. But the main difference between them is formation.

The inverted hammer is formed when the price goes down, showing that the next price will go up for some time. Compared to this, the shooting star candlestick is drawn when the price goes up in a row, indicating that the next price will decrease.

Limitations of Shooting Star

The traders don’t have to rely on the shooting star candlestick pattern to make critical decisions in the trading. It is because every decision before trading needs complete confirmation.

Traders should have to confirm before deciding with the help of other indicators or the details of the following day’s candle.

Every trader needs to use the stop-loss when trading with shooting star candlestick to handle the more loss. This candlestick pattern is vital if formed at the critical level where the other technical analysis indicates this.

Frequently Asked Questions (FAQs)

How do you trade a shooting star candlestick?
  • The first step is to recognize the bullish trend that is active.
  • Find the small body candle that contains the higher high candlewick.
  • Now, you have to wait for the bearish candle to gap the lower point of the star candlestick body.
  • Confirm the high volume and then high supply signals.

With the help of all these steps, you can quickly validate the shooting star candlestick on the trading chart.

Do candlestick patterns work on Crypto?

Yes, the candlestick charts work on the Crypto and are best for crypto traders. The reason is the visual appeal, and it is straightforward to understand the nature of it.

Can a shooting star candle be green?

Yes, the shooting star candlestick is green, but it depends on the settings of your chart. Compared to this, the inverted hammer’s real body is present in the green or red color.

Which candle is used in intraday trading?

In intraday trading, the shooting star candle is considered the best pattern. It is one of the most reliable and significant. In this trading, the shooting star candlestick shows the bearish reversal, and as compared to this, the inverted hammer candlestick shows the lower trend.

Conclusion

The most reliable candlestick pattern that every trader has to learn about is the shooting star candle. In the trading world, too many people believe the shooting star is the same as the inverted hammer.

The shooting star candle pattern is very well-known among traders. This pattern shows different information, such as the behavior of market price. It serves as the perfect indicator and informs the traders about entering and exit time.